UK business group CBI on Monday released a report warning that the country’s current policy of incentivizing investments in wind power would result in too little investment in other forms of low-carbon energy, such as nuclear and clean coal. The approach will make energy security harder to achieve, and it could jeopardize the UK’s ability to meet climate change targets, the group said.

In its report, titled “Decision Time” (PDF), CBI—a coalition of some 240,000 UK businesses—called on the government to pursue policies that would deliver a more balanced energy mix to bolster energy security and help reduce carbon emissions more cost-effectively in tougher economic times.

“While we have generous subsidies for wind power, we urgently need the national planning statements needed to build new nuclear plants. If we carry on like this we will end up putting too many of our energy eggs in one basket. But by moving government policy in a different direction we can achieve a good balance of wind, nuclear, gas and clean coal,” said John Cridland, CBI deputy-director general in a statement.

The report follows a study from consultancy firm Poyry earlier this month that warned against relying on wind power, saying that unpredictable weather patterns could result in price spikes and threaten investment in back-up power generation.

The CBI report examines, using analysis from research firm McKinsey & Co., two scenarios for Britain’s energy future. Both keep a reserve margin of 20% over peak demand. If the UK follows a “business as usual” pathway, the country’s generation portfolio would increasingly be dominated by a mix of gas-fired power stations and some renewables, the report finds. By 2030, the country could “be struggling to stay on course of [its] 2050 carbon targets, with power sector carbon emissions of around 60Mt CO2—much higher than the Climate Change Committee has recommended,” it warns.

Following current policies could also force the nation to build 25 GW of new gas-fired generation to ensure supply security. Making matters worse, the UK would likely experience some of the highest electricity and gas prices in the EU, the report said.

If the government acted during the next 12 to 18 months—when “companies are gearing up for the biggest wave of investment for several decades”—the report says, “the results are encouraging.” It shows that a “balanced pathway” of investment emerges, with large volumes of wind generation complemented by a larger nuclear program, some gas-fired generation for flexibility, and a blend of other renewables and carbon capture and storage (CCS) coal stations making up the balance.

Investments for the “balanced pathway” scenario and the “business as usual” scenario were almost the same—around £150 billion over the next 20 years. But achieving a “balanced pathway” scenario would require several critical steps, the report said. Foremost among these was to reduce the percentage of wind power expected by 2020 under the Renewables Strategy—a wind-oriented policy that is due this month—to encourage investment in other low-carbon energy sources.

The government would also need to speed up new nuclear planning processes and press ahead with CCS demonstration plants. “Clear funding arrangements for CCS need to be in place by June 2010 and the timeline for new nuclear must not be allowed to slip,” CBI said.

Other measures included accelerating investment in the grid; introducing measures to improve energy efficiency; and setting up a joint government-industry task force by September 2009 to explore whether an additional market mechanism is needed to incentivize the volume of low-carbon generation that must be built.

Source: CBI